Evaluation methods for judging a business’s prospects for success have come and gone, but the SWOT analysis has been a constant fixture in corporate planning and strategy meetings since the mid-1970s.
A SWOT analysis is flexible. It can be equally effective for the world’s biggest companies and for sole proprietorships. SWOT can help you analyze the merits of your entire company, a particular project, or even a potential product or service introduction.
What is a SWOT analysis?
A SWOT analysis helps you to take an objective look at your company prior to taking – or not taking – a particular type of action.
Specifically, a SWOT identifies your…
Depending on what course of action is being considered, a SWOT analysis can be executed at a corporate, departmental, or individual service or product level. You can conduct a SWOT by yourself, but the analysis tends to be most thorough and effective when input is solicited by other, informed stakeholders.
Why use SWOT?
A SWOT can be performed on your company once a year, to give you a “big picture” perspective of how you’re doing and what might be improved.
A SWOT analysis can also be used to prepare for presentations to potential clients, investors, or bankers. (You don’t show them your analysis. You prepare it only to make sure you’re ready for their possible questions.)
But most importantly, a SWOT analysis can help you and your team determine if a particular goal or objective is realistic, given the current state of your company.
For example, if your company is considering opening a sales office in a new territory, a SWOT analysis can help you decide if this is the right time, and what sort of resources you should allocate to make it work.
Strengths are advantages you have relative to your competition, or that are directly applicable to the possible action under consideration.
Strengths can include a strong brand, a reputation for quality work, a well-trained sales force, a great business location, or anything else that increases your chances for success.
Like all four components of the SWOT, strengths tend to change over time. What might be viewed as particular strength today might be seen as average or “run of the mill” in the future as competitors work to close the gap, or as external factors like changes in customer preferences or improvements in the technology level the playing field.
Weaknesses are characteristics that have you at a disadvantage relative to others, or that negatively impact your chances for achieving your objective.
A weakness can take the form of a bad financial position, perhaps because of cash flow management challenges, a reputation for “cheap” or below-average products, or just being new in the marketplace.
It’s no fun to talk about your weaknesses but, generally speaking, the improvements you make in your weakest areas – even in small increments – tend to have a faster and larger impact than the improvements you might be tempted to make to your strengths.
Opportunities are external factors that can be used to your advantage. The key here is to recognize the “external’ nature of opportunities, as they are usually outside of your direct control. Your job – and what you can control – is to recognize and exploit the right opportunities.
Many opportunities are the result of sudden or unexpected changes. A surge in fuel prices, for example, would normally present opportunities for energy-efficient vehicles. But long-term trends, like consumers’ continued reliance on personal electronic devices or economic troubles in parts of Europe, can present opportunities as well.
Like opportunities, threats are external, but have the potential to cause your project to fail. The presence of a threat (and there are always threats) doesn’t mean you necessarily abandon your plan, but it does mean you need to figure out a way to blunt its effects on your objective.
A threat can take the form of a powerful competitor, the possibility of increased government regulations, or even just a weak economy.
Getting Started with SWOT
Perhaps, without even knowing it, you have used some form of a SWOT analysis for as long as you’ve been in business. In fact you probably performed a SWOT, unconsciously, at least, when you were considering starting or buying your company.
But if you’re ready to get out the white board and make the process formal – and you should – here are a few tips for making SWOT analysis work for your company.
1.) There’s strength in numbers. It was touched on before, but be sure to involve all the logical players when performing the analysis. You might be surprised at how much you learn.
2.) Provide details. For example, if your company considers “personnel” a strength, you should name names, or at least areas of responsibility, and describe how quality personnel specifically can help meet your objectives.
3.) Re-visit your weak points. If certain shortcomings make it impractical to pursue a particular project right now, define plans to improve those areas and re-evaluate after a specific time period. With the right action plan, the situation could look much more attractive in six months.
Discover more creative methods of business growth at MP Star Financial:
- Creative Ways to Grow Your Business: Time Management Strategies
- Creative Ways to Grow Your Business: Make Yourself an Expert
- Creative Ways to Grow Your Business: Tapping Your Company’s Idle Assets
- Creative Ways to Grow Your Business: Online Advertising
- Creative Ways to Grow Your Business: Job Sharing
If cash flow management concerns are keeping your company from executing the strategies that can help it grow, consider an invoice factoring program with MP Star Financial. Call for more information about invoice factoring today. (800) 833-3765, extension 150.